Trade Ideas for 02/17/09

I'm getting mixed messages from Friday's action. There wasn't the continuation rally that has typically accompanied a late Thursday surge. Although prices didn't get close to Thursday's lows, all the major averages closed at the day's lows in a vote of no confidence. There were three attempts at rallies, each with lower highs, each time met with selling. The message of the day was "no go." On the other hand, perhaps we needed a day to correct that late Thursday surge. Recall that Wednesday's action was similarly rangebound; there's a kind of symmetry in having a day of rest before and after a move (a potential reverse head and shoulders pattern, see below).


Looking at the somewhat bigger picture, the SPY did not defend that $85 level at all, and it will need to recapture it quickly to retain the bullish look. At this point, price is near the bottom of a trading range that has been in effect since mid-January. If the trading range holds, then a rally should materialize Tuesday, fulfilling the potential of the head and shoulders pattern. But every trading range ends at some point, and that point could be Tuesday on a breakdown. Ominously, the Dow had its lowest close thus far in 2009. The key takeaway for me is mixed messages. Be prepared for the market to break either way on Tuesday, and if that direction happens to be lower, then new 52-week lows in the Dow become a real possibility. Rally instead, and who knows? Maybe SPY 110 in a couple months.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
DOG	75.51	75.56	+0.1%	71.39	N/A	Chart
BEAV	10.73	10.73	+0.0%	9.99	N/A	Chart
CSR	5.91	5.51	-6.8%	5.16	Consider selling on a close < 5.33	Chart
PAAS	17.68	17.51	-1.0%	16.04	Consider selling on a close < 16.95	Chart

Up or down? One idea for each possibility.

New Trade Ideas

Ticker	Entry	Exit A	Exit C	Chart
GOOG (Google)	365.01	355.22	351.47	Chart
EFU (Ultrashort MSCI EAFE)	115.46	108.68	N/A	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.